A review of the oil deregulation law, or its amendment, is not the appropriate response to rising oil prices, Energy Secretary Vincent S. Perez said yesterday.
He said deregulation should not be blamed since the country, as a net importer of crude oil and fuel products, could not avoid the affects of high world market prices.
For his part, Fernando L. Martinez, chairman of the Independent Philippine Petroleum Companies Association, said external factors were to blame, and that they had nothing to do with local deregulation.
President Gloria Macapagal-Arroyo reportedly plans to ask Congress to review the oil deregulation law, given complaints by transport groups that blame the law for high fuel prices.
"The oil deregulation law is not the cause of high prices today. The increased competition in the local market has even kept prices relatively low. The Philippines, despite the escalating prices, still enjoys the cheapest oil in Asia for oil-importing countries," Mr. Perez said.
He noted world oil prices have been hitting all-time highs in past weeks, putting pressure on local prices.
He also said a recent terrorist attack in Saudi Arabia, the world's largest oil producer, made the oil market jittery. This, in turn, affected prices.
Mr. Perez added the falling peso also made imported oil and fuel products more expensive.
"While oil deregulation has helped the entry of major investors in the local oil market, it is still a work in progress... Any call for amendments in the oil deregulation law is best left in the hands of Congress," Mr. Perez said.
He added the Energy department would look at provisions that would allow the government to "tighten its role" in times of crisis.
Mr. Martinez also said that a deregulated environment was the best for all because "it works." He noted small firms like his firm Eastern Petroleum Corp. managed to compete because of deregulation.
But even if the oil deregulation law is repealed, this will not really affect oil companies, he said. Oil firms can live in either a regulated or a deregulated environment, he said, provided there are "guaranteed margins."
"If they want to go back to regulation, they will have to recall what the situation was during the regulated period. There will be subsidies that will have to be laid. If they want to give oil companies guaranteed margin through the oil price stabilization fund, it may even be better for oil companies," he added.
For her part, Total (Philippines) Corp. Corporate Affairs Manager Rona N. Quejada said her firm would wait for the government to detail the proposed review of the law.
"We don't know if we have to make adjustments because when we came in, it was under a deregulated environment," she said.
She also said that a policy review was "within the government's jurisdiction," and that Total would "respect what the government will decide to do."
In a statement, Total also said it hoped the review "will result in a win-win situation both for the Filipino consumers and the industry players."
Pilipinas Shell Petroleum Corp., for its part, said it would wait for the government to make a formal announcement of a law review. Petron Corp., 40% owned by the government, declined to comment.
FUTILE
Even economists claimed a government review of the oil deregulation law would be futile. "If we want [oil] prices on a fixed-rate basis, that could be done only if global prices were lower, which is not the case," said economist John Lawrence Avila of the University of Asia and the Pacific.
"That is a very politicized issue, in the same way consumers want lower prices of commodities, and laborers want higher wages," added Bienvenido Oplas, Jr. of Think Tank, Inc.
"But this is a commodity sold everyday [hence controlled by the law of supply and demand]. The government has other serious problems to solve other than that," he said.
If the government is bent on reducing oil prices, then it must be ready to make sacrifices on its already weak fiscal position, Mr. Avila said.
"Since oil prices are high, then the government must subsidize the differential [between the actual selling price and the supposed selling level]," he said.
Lower oil tariffs will also cut government revenues.
The government can also look into alternative fuel and energy sources.
"The government could mandate the use of natural gas, of which we have an excess, for buses or households -- or even check the sale of vehicles [and promote mass transport] to reduce demand for oil," Mr. Oplas said.
Republic Act 8479 or the Oil Deregulation Law was enacted by the 10th Congress in 1998. It bars the government from interfering with the pricing, export, and import of oil products, and the establishment of retail outlets or gasoline stations, storage depots, ocean-receiving facilities, and refineries.
The Palace said the law would be reviewed while it searched for oil sources other than the Middle East.
Data from the Department of Energy showed Dubai crude, the regional price benchmark, averaged $34.74 per barrel in May, from $31.68 per barrel in April. Unleaded gasoline hit $49.71 from $44.09, and diesel rose to $44.74 from $42.82.
No less than the Department of Energy admitted that with world oil prices staying high, there was slim chance local prices would go down.
Since the start of the year, gasoline rose by PhP3.30 to PhP3.35 per liter, diesel by PhP2.10 to PhP2.15.
Yesterday Petron Corp. raised the price of its cooking gas by PhP1 per kilogram to match the increase made by its competitors over the weekend.
"Petron will increase LPG prices by PhP1 per kilogram effective 12:01 am, June 2, Wednesday, to reflect higher contract prices," the firm said.
A cylinder of Petron Gasul will cost between PhP336 and PhP346, an official said. Contract prices increased to $319 per ton in May from $293 per ton in April. -- with Rommer M. Balaba
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